· The main policy required
to deal with the housing market in order to assist households is continued
efforts to increase the supply of homes, with an emphasis on areas of high demand.

· The increasing risk in
the mortgage field, and measures by the Banking Supervision Department, have
led to a more fair pricing of the risks, and after years of continued declines
in the interest rates on mortgages, there has been some increase in those rates
over the past year.

· In addition to
increasing the supply of homes, there are other tools that can make it easier
for borrowers, such as eligibility loans.
A measured increase of institutional activity in the provision of
housing credit will also act to lower the prices of mortgages.

Bank of Israel Governor Dr. Karnit
Flug:

·
Home prices in Israel have
increased significantly in recent years—a situation that is not unique to
Israel. The response to the increase in
home prices by increasing building starts was very slow, and only in recent
years have we seen an increase in building starts to the level that we believe
is more or less in line with current demographic needs.

·
The Bank of Israel interest
rate, which was lowered to near-zero in order to support growth, employment,
and price stability, obviously also had an effect on mortgage interest
rates. In this context, it is important
to remember that the interest rate on mortgages is also influenced by long-term
yields in the bond market, the banks’ risk assessments regarding the housing
credit market, and other things. As a
result, we have seen some increase in the mortgage interest rates in the past
year.

· The main policy required
to deal with the housing market in order to assist households is continued
efforts to increase the supply of homes, with an emphasis on areas of high
demand. It is important to remember that
the State controls most of the land, as well as the planning process. The Ministry of Finance is making very
important efforts in this area, and these should be continued.

·
The volume of land
available for construction in high-demand areas should be increased, the
duration from planning to building starts should be shortened, and there should
be greater synchronization between building plans and infrastructure
development.

·
The process of bringing
foreign construction companies into Israel should continue to be advanced,
thereby helping to narrow the productivity gap in the construction industry and
to adopt new technologies.

· Other tools in the
mortgage field that could make it easier for borrowers:

o It is possible to help mortgage borrowers through higher
eligibility loans at better prices, as was done in the past. The volume of loans to eligible borrowers has
fallen to almost zero in recent years.
Recently, the interest rates on this type of loan were reduced, and the
use of this tool can be expanded to help the eligible population.

o Increasing the presence of institutional investors in the
provision of housing credit, inter alia through securitization, can increase
the supply of credit and reduce its price.
This should be done in a measured way in order to make sure that this
process will not lead to a renewed increase in demand for mortgages and homes,
and thereby to a further increase in home prices.

Supervisor of Banks Dr. Hedva Ber:

·
As a result of the increase
in home prices, households have taken out greater loans for longer
periods. As a result, the risk inherent
in housing loans has increased, both from the consumer’s point of view and from
the banks’ point of view.

·
In response to the increase
in risks in the housing area, the Banking Supervision Department took a series
of measures to protect consumers and maintain the stability of the banking
system.

·
The measures taken led to a
more fair pricing of the risks, and after years of declines in the mortgage
interest rates, there has been some increase in those rates in the past year.

·
In addition, in order to
support an increase in the supply of homes, we allowed the banks to increase
the supply of credit to the construction industry by recognizing the banks’
sale of risk to secondary insurers abroad.
In addition, we instituted leniencies for non-homeowners to purchase
homes in “Buyer’s Price” projects.